'CBS MarketWatch Weekend': Complete transcript of show

CBS.MarketWatch.com

Following is a complete transcript of last weekend's (May 6-7) installment of "CBS MarketWatch Weekend," as recorded by Federal News Service.

MS. CHRISTOFOROUS: (In progress) -- Datek Online. The information and technology professionals use to trade is now available to everyone. "Datek Online, the rules of online trading are changing."

Coming up on "CBS MarketWatch Weekend," Wall Street bull Abby Joseph Cohen sits down with Marshall Loeb and chats up her predictions about the vibrancy of the U.S. economy. Could a recession be on the horizon?

Plus, what's so cool about urban cool? Russell Simmons, the godfather of hip-hop culture and founder of DefJam Records, is bringing his latest venture to the Internet.

And Silicon Valley, watch out. Where new media is thriving, venture capitalists are looking for who could emerge as the next AOL, and they are looking for clues in the Big Apple. It's all straight ahead on "CBS MarketWatch Weekend."

We have gotten through one of two key events for Wall Street, the employment report, which underscored the tightness of the U.S. labor market. And market-watchers are now bracing for event number two, a possible 50-percent (sic) hike in interest rates when the Federal Reserve meets May 16th. In the words of one analyst we spoke to, "Get ready for a long ugly slog through the summer months."

For now though, let's hand it over to Stacey Tisdale for a closer look at Wall Street and what we can expect in the week ahead. Stacey?

STACEY TISDALE (CBS MarketWatch correspondent): Thanks, Alexis.

Investors were able to shrug off the stronger-than-expected employment report. All major indices were higher Friday but on very thin volume. The Dow
DJ
gained 165 points to close at 10,577, but the index lost 1.5 percent for the week. A more than 96-point gain for the Nasdaq
$nasdq
Friday -- but it also lost more than 1 percent for the week.

The market players will be on earnings' watch in the coming days; some of the biggest names of the technology world report. Internet infrastructure giant Cisco Systems
"
releases numbers on Tuesday. Then on Thursday, it's Dell Computer
dell
and Applied Materials
AMAT, -1.58%

On the economic front, Thursday, the government releases its retail sales report and, Friday, the Producer Price Index for April. Now, if the data are strong, they could fuel inflationary fears on Wall Street.

Reporting from the Nasdaq market site, I am Stacey Tisdale. Now, back over to you, Alexis.

MS. CHRISTOFOROUS: All right. Thanks, Stacey.

For high-tech firms recovering from the recent market shock it means putting a very specific battle plan into effect. In this week's StockWatch, Thom Calandra tells us what that means for the big long-standing multibillion techs and the smallfry's.

(Announcements)

THOM CALANDRA (CBS MarketWatch and FTMarketWatch Editor-In-Chief): This is about the business of getting back to business. Across the global landscape of tumbling technology companies, executives, employees and strategists are having to pick up the pieces, go back to work, take their eyes off the stock market. Most technology executives are shaking their heads in disgust at the Nasdaq market-makers and the investment bankers. These are the folks who gleefully participated in their share offerings, then abandoned them in this Spring's tech tumble. In Silicon Valley, those hard feelings are best left locked somewhere in a desktop drawer, safely bottled.

In the case of Microsoft
MSFT, -1.81%
the embattled software giant, getting back to business means slicing the strike price of its employee stock options. At far smaller companies, those without $4 billion in the bank, business means developing new products, recruiting employees, launching new websites. For some companies, the ones that have a worldwide presence, a lot of money or both, that's easier than for the tiny tech companies that have been bloodied in recent weeks. The greatest challenge for small tech companies will be holding on to employees who have seen their precious stock options practically evaporate -- poof! -- in the tech tumble.

The companies that survive these tough times probably will be the ones with cash, creative job offers, and who knows, a very, very good cafeteria.

In San Francisco, I'm Thom Calandra, CBS MarketWatch.

MS. CHRISTOFOROUS: Thanks, Thom.

Some Internet companies traded down to the level of their cash and securities these past two weeks, only to bounce back, like NBC Internet stock, NBCi. The bounce back might indicate the worst is over for the Internet companies, especially those with cash to last a few years.

And as always, you can find all of Thom's StockWatch columns on our website at CBS.MarketWatch.com.

Still to come on "CBS MarketWatch Weekend" -- her predictions about the markets have come true. Now Abby Joseph Cohen forecasts the state of the U.S. economy -- what may help it, what may hurt it. Abby Joseph Cohen talks to Marshall Loeb about what's in store for the future. That's next.

ABBY JOSEPH COHEN: We see no recession this year or next. We think that the excesses that would normally bring about a recession are nowhere in site.

(Announcements)

MS. CHRISTOFOROUS: When Abby Joseph Cohen speaks, the financial world listens. Abby Cohen is the managing director and chief investment strategist for Wall Street's Goldman Sachs. Last week, Marshall Loeb presented you with some of her ideas. This week Marshall talks with Abby herself about the state of the American economy and where it's headed from here.

MARSHALL LOEB: Abby, why has this economy performed so well for so long?

MS. COHEN: Marshall, we've been very lucky this past decade because of the confluence of several positive factors. First, economic policy in the United States has been quite good for the last decade. Just think, for example, about the enormous swing from a large budget deficit to a budget surplus.

Secondly, we've had a significant improvement in the way our companies are managed. Companies are really focusing in on making sensible, long-term investments in their workers.

And finally, we have had a global situation in which inflation has come dramatically lower.

MR. LOEB: Do you expect a recession to strike later in 2000 or 2001?

MS. COHEN: We see no recession this year or next. We think that the excesses that would normally bring about a recession are nowhere in sight.

MR. LOEB: Well, does that mean that we have repealed the business cycle?

MS. COHEN: Not at all. I do believe that the economic cycle is alive and well, but it has been stretched out. We have referred to this as the "Silly Putty" economic cycle in which we have a cycle that gets smoothed out along the edges, but there will be ups and there will be downs.

MR. LOEB: What should we do to keep the magic going?

MS. COHEN: The magic of this economic cycle is related to good decisions by the government on policy and good decisions by corporations. I think if corporations, and consumers as well, continue to focus in on making sensible decisions in terms of spending, and sensible decisions in terms of capital investment, we should be in good condition for a long while to come.

MR. LOEB: What keeps you awake at night? What are your worries?

MS. COHEN: Over the last several years, my worries have really focused in on developments outside the United States. The fact, for example, that Japan, the world's second-largest economy, is still struggling with very weak economic growth is difficult. China, the world's most populous nation, has an extremely high unemployment rate. So these are concerns to me.

Within the United States, my concerns are actually quite small, although we do keep a number of factors up on that radar screen all the time. Among the near-term issues that we are monitoring quite carefully include labor costs, which are rising ever so slightly; to corporate profits, which look to be in very good condition; and number three, we are looking at the political campaign and to see if our presidential candidates continue to support what we consider to be good economic policies.

MR. LOEB: Is downsizing continuing in corporate America? And has downsizing been helpful or hurtful to the economy and to the labor force?

MS. COHEN: When companies began to lay off workers, trying to boost their own efficiency, it was very painful. Companies are still laying off workers, but at the same time, companies are hiring many more workers. On a net basis over the last five years, U.S. companies have hired 16 million new workers, and that's a terrific end result.

MS. CHRISTOFOROUS: We got a fresh look at the employment picture on Friday. The unemployment rate dipped to its lowest level in 30 years, a low of 3.9 percent in April. Businesses added 340,000 new jobs to their payrolls last month. And remember, you can view more of Marshall's interview with Abby Joseph Cohen, as well as all of Marshall's columns, on our website at CBS.MarketWatch.com or on AOL, keyword "MarketWatch."

Still to come on "CBS Market-Watch Weekend," New York is increasingly becoming a hotbed for venture capital activity. Is Silicon Alley poised to replace Silicon Valley? We'll have an inside look. And rap and hip-hop is big business. Russell Simmons is hoping it will be even bigger. The co-founder of Def Jam Records is about to explode onto the Internet.

(Announcements)

MS. CHRISTOFOROUS: Welcome back to "CBS MarketWatch Weekend."

May Day may have been payday for some start-up companies hoping to bloom despite the recent Nasdaq storm. CBS MarketWatch's Steve Gelsi visited the New York New Media Association's annual venture capital conference and found a few companies hoping to be the next big thing.

STEVE GELSI (Reporter, IPOs, media): Here at the Venture Downtown Conference, there are plenty of new companies stepping up to the plate in the Internet sector despite volatility among Webs stocks on Wall Street. You've got venture capitalists and companies hooking up and talking. It's a New-York-style schmooze-fest.

ALIZA SHERMAN (Co-founder, Eviva.net): We're here to find the right venture capitalists, the right angel investors at the moment, who are very interested in reaching minority-owned business owners, interested in reaching women. So we're finding some great, enthusiastic people here.

GRAHAM ANDERSON (Vice chairman, Euclid Partners): Everything in wireless now is about as hot as you can possibly get.

SPEAKER: New Media has really invigorated New York City.

MR. GELSI: This is where publicly traded companies such as About.com
bout
HotJobs.com
hotj
iVillage
ivil
and Razor Fish
razf
have gotten their start. Now the Internet sector is the fastest-growing segment in the city. And it's not only for start-ups. Goliaths like Time Warner
TWX, -1.28%
and Merrill Lynch
MER, -3.69%
are here trying to tap into the next hot thing.

RICHARD DRESSLER (CEO, Time Warner Digital): Who is the next emerging AOL? You know, Time Warner started a $500 million Digital Media Fund a number of months ago. And now, as we go forward into the new AOL-Time Warner, I think we're going to step up our investors' activities significantly, not just here in New York and not just in Dulles and not just Silicon Valley, but really on a worldwide basis.

MR. GELSI: Meanwhile, Merrill Lynch is scouting for more technology and content players.

HENRY BLODGET (Internet analyst, Merrill Lynch): Well, I think that one of the things that is not affected directly by what's happened in the market over the last month or two is this -- the enormous supply of venture capital money.

MR. GELSI: So while the NASDAQ's recent hiccups have hurt some, the appetite for fresh deals is still big. That means we'll still see lots of companies growing and going public in the near future. Steve Gelsi, CBS MarketWatch.

MS. CHRISTOFOROUS: The New Media Association's annual conference is becoming increasingly popular. About 1,000 people turned up for this year's event. That's up from 750 last year.

And coming up on "CBS MarketWatch Weekend": Get ready for the nation's number-one online broker to get a whole lot bigger. Charles Schwab's
SC.H, -44.00%
president and co-CEO David Pottruck explains how.

And the godfather of hip-hop hops on to the Internet. We talk to Russell Simmons, who brought urban cool to malls across America. Now he's hoping to do the same on the Web.

(Announcements)

MS. CHRISTOFOROUS: Is Wall Street getting hep to hip-hop? Pose that question to Russell Simmons, and you might be surprised at what you hear. You may know Simmons from his days with Def Jam Records back in the '80s. Since then Simmons has created a hip-hop empire worth about $500 million.

I had a chance to talk to Russell Simmons about the many hats he wears, from marketing maven to record label king.

Rap and hip-hop -- it's not just music, it's a way of life, a thriving trend based on African American urban culture and fashion. Its appeal cuts across racial and economic lines. Case in point: the 1998 Warren Beatty film "Bulworth."

(Video clip of "Bulworth")

So how did hip-hop go mainstream? Meet the godfather of hip-hop, Russell Simmons.

RUSSELL SIMMONS (founder, 360hip-hop.com): When we look at hip-hop closely, you find that 80 percent of the people who buy the records are not black, which might come as a surprise to you and some of the viewers. The fact is that hip-hop has a huge army of young people. If you think about the two young cultures in America that have any kind of influence, cultural influence, you think of -- one, you might find alternative, and the other one is hip-hop, which is by far the most dominant, in terms of culture and cultural influence.

MS. CHRISTOFOROUS: "Influence" is putting it mildly. Hip-hop has become a multi-billion-dollar industry, and Russell Simmons is a big reason why. Co-founder of the profitable record label Def Jam, Russell developed artists like JZ (sp) and DMX. And over the past couple of years, hip-hop records have often outsold rock and country.

But he didn't stop there. Russell Simmons tried his hand as a Hollywood producer and found box office success with such films as Eddie Murphy's "Nutty Professor."

He threw his hat into the fashion ring, with his own line of street styles called Phat Farm. Baggy pants and designer sneakers have become a suburban uniform.

Oh, and let's not forget his own advertising agency, which touts Coca-Cola among its many high-profile clients.

What is the key to your success?

MR. SIMMONS: One of the things that makes us special is that one of the ways that we marry -- is that we marry business and commerce in a very smart way.

MS. CHRISTOFOROUS: But people expect results from this trendsetter with the Midas touch. From this unassuming loft in Manhattan's chic Chelsea District, Russell Simmons and crew are hard at work on their next project -- cashing-in on the Internet by consolidating his empire into a website called 360HIPHOP, and that direction is toward profitability. The hip-hop generation is willing to spend, spend big to stay hep.

Wall Street has shown a lot of interest in HIPHOP, but for now Russell Simmons is focusing on getting his website up and running and has no plans to go public yet. The companies capitalizing on the urban cool trend include Tommy Hilfiger, Nautica and Nike. So far, the web has been used as more of a marketing tool for these companies, and the investment community is still waiting on a winner to emerge in the realm of e-commerce.

Meanwhile, the plot is thickening in the legal battle over the online music world, and the outcome could decide the fate of billions of dollars in royalty fees as music moves on to the Internet.

First, a federal judge ruled that parts of online music provider MP3.com
mppp
violate copyright laws. That after the recording industry sued MP3.com for alleged copyright violations. Then just this past week, heavy-metal band Metallica sued Napster.com, as well as its fans, for alleged music piracy. Napster uses technology that allows users to swap music from their computers.

"CBS MarketWatch Weekend" asked the CEO of MP3.com what he thinks about the case.

MICHAEL ROBERTSON (CEO, MP3.com): Napster is what we call the "nuclear winter" for the music industry. I mean, it's just blatant piracy, it's file swapping, no benefit to the music industry whatsoever.

MS. CHRISTOFOROUS: But Napster says their service does not directly provide the copyrighted music, only the means to get it. The company claims its service is legal.

And as for MP3.com, Robertson says the company hopes to settle their own lawsuit.

MR. ROBERTS: The last thing an Internet company needs is a three-year legal entanglement. And the music industry really needs some technology that is responsible technology that allows people to get excited about digital music.

MS. CHRISTOFOROUS: MP3.com expects a written ruling from the judge within the next couple of weeks, and they may file an appeal after that. More likely, the Recording Industry Association of America may negotiate a percentage of advertising revenue from MP3.com as compensation for music offered online.

Coming up on "CBS MarketWatch Weekend" -- he oversees assets of almost 7 million accounts worth more than $800 billion. The man behind Charles Schwab is coming up. David Pottruck, president and co-CEO, tells us about some of his market fears and a whole lot more.

Stay with us.

DAVID POTTRUCK (President, co-CEO, Charles Schwab): What's new about the Internet is much less about low prices and much more about access and information.

(Announcements)

MS. CHRISTOFOROUS: Get ready for the nation's number one online broker to get a whole lot bigger. Charles Schwab President and co-CEO, David Pottruck, says he expects his company to double or even triple in size over the next few years. But Pottruck's got some deep concerns too. He says that too many investors are borrowing money to buy their stocks.

MR. POTTRUCK: I do worry about the amount of leverage that exists and the number of customers who have allowed themselves to get heavily involved with margin buying. I think this most recent market correction has started to teach people of the concerns and the risks of being leveraged, and I think that's healthy.

JON FRIEDMAN: You call it a "correction." And not to be glib but to a lot of people, it was more than a correction; it was a very scary time. They saw their life savings and money flying out the window. Were you scared?

MR. POTTRUCK: Well, I really take a long-term view. And I hate to see our customers get hurt. And I know on that day, with the markets going down, especially in the Nasdaq, as dramatically as they did, that a lot of our clients were seeing some of their hard-earned money disappearing on them. But in the long-term view of the health of our company, and of the stock market in general and our economy, that's part of the equation. And so no, that in that sense, I wasn't worried.

MR. FRIEDMAN: What do you see, Dave, as being the future of investing in the U.S.? Can we go beyond the day-trader?

MR. POTTRUCK: What's new about the Internet, it's much less about low prices and much more about access and information. The individual investor can get information virtually simultaneously with professional investors. So now the individual investor can compete with the Wall Street professionals. And oftentimes, because they have smaller amounts of money, they can be more nimble and actually be more successful than professional investors. So the opportunities in the future are spectacular.

MR. FRIEDMAN: At Schwab, you have done it all, this kind of brokerage; mutual funds, online brokerage. So what's next?

MR. POTTRUCK: Customers have told us that they would like us to provide checking accounts and online bill-paying. Because they have so much of their assets at Schwab, it just makes it easier for them. Customers have suggested to us that we ought to consider helping them get a mortgage, and so we have just recently announced our new partnership alliance with eLoan
eeln
And I think finally, our upcoming merger with U.S. Trust is going to allow us to provide a realm of wealth-management services and trustee services for the individual investor clients and the investment adviser clients at Schwab.

MS. CHRISTOFOROUS: Pottruck's strategies for managing growth successfully in the Internet culture are now in print. His new book "Clicks and Mortar" stresses the importance of understanding how to use the Web in business. Pottruck also highlights some of the mistakes he has learned from over the years. And with Schwab doing so well these days, it's no wonder a lot of executives are heeding his advice.

Well, that wraps this edition of "CBS MarketWatch Weekend." I am Alexis Christoforous. Thanks for joining us. Have a great week. And until next time, we'll see you on the World Wide Web.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.